Midterm Review Flashcards
What does the PCAOB do?
The Public Company Accounting Oversight Board protects investors by auditing the auditors.
In which part of the balance sheet would you find prepaid expenses?
Assets
In which part of the balance sheet would you find unearned revenue?
Liabilities
In which part of the balance sheet would you find accrued expenses?
Liabilities
In which part of the balance sheet would you find retained earnings?
Stockholders’ Equity
On which financial statement would you find the sales revenue?
Income Statement
On which financial statement would you find the accounts payable?
Balance Sheet
On which financial statement would you find the interest expense?
Income Statement
When we increase an asset, do we do it with a debit or a credit?
Debit
When we increase a liability, do we do it with a debit or a credit?
Credit
When we decrease equity, do we do it with a debit or a credit?
Debit
How do we find the gross profit margin?
Gross Income divided by Net Sales
How do we find gross income?
Revenue subtracted by COGS
What does total asset turnover ratio measure?
How efficiently a company uses its assets to generate sales revenue.
What is the numerator for the asset turnover ratio?
Net Sales or Operating Revenues
What items are removed from gross sales to obtain net sales?
Sales Allowances, Sales Discounts, and Sales Returns
Between FIFO, LIFO, and Average Cost methods, which one results in an ending inventory that best approximates current replacement cost?
FIFO
When would we choose to amortize something instead of depreciate it?
When the asset is intangible.
Is Goodwill a definite life or indefinite life intangible asset?
Indefinite Life
What do we do with goodwill since it is not amortized?
Test at least annually for impairment.
What is liquidity?
The ability to pay current obligations.
How do we calculate working capital?
Current Assets subtracted by Current Liabilities
